Financial Daily from THE HINDU group of publications
Sunday, Dec 21, 2003
Financial Daily from THE HINDU group of publications Sunday, Dec 21, 2003 |
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Investment World
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Stocks Markets - Recommendation Igarashi Motors: Buy B. Krishnakumar
Though the performance in the near term is unlikely to improve significantly, the company is expected to record a steady growth from the next financial year. The recent efforts to expand the consumer base along with the decision to move up the value chain is likely to have long-term positive impact. Igarashi Motors makes DC micro motors that find application in a host of industries, including automobile, power tools, domestic appliances and office equipment. The company derives close to 90 per cent of its revenues from the automobile industry. It is an export-oriented unit and caters to highly quality-conscious markets such as the US, Europe and Mexico. After a steady growth in earnings, the company had to contend with a reversal in performance in the previous fiscal.
For the year ended March 2003, the turnover fell 26 per cent to Rs 75.8 crore while post-tax earnings 29 per cent to Rs 7.3 crore. On the equity base of Rs 11.9 crore, the per share earnings works out to Rs.5.87. The performance has continued to remain lacklustre this fiscal too. For the half year ended September 2003, the turnover declined 54 per cent to Rs.23.8 crore. The company had to contend with a net loss of Rs 1.2 crore compared to a profit of Rs 5.56 crore in the corresponding previous period. The drop in revenues is attributed to the loss of business from one of the company's key global clients. This, in turn, has resulted in a loss of revenue for Igarashi Motors India. Besides, the slowdown in global auto industry along with the delay in the flow of orders from key customers resulted in a drop in earnings. Though the recent performance may not evoke much confidence, the company has strong presence and brand equity in the export market. It has sold over one million motors over the past seven years. Besides, the recent efforts taken by the company should start yielding positive results in the longer term. The company has taken efforts to broaden its clientele base. It is also initiated the process to design, develop and make motors for global auto majors. As a result of these efforts, Igarashi Motors now has confirmed orders from global auto-ancillary majors such as Bosch, Delphi, ArvinMeritor, Magneti Marelli, among others. The company is also trying to position itself as a one-stop-shop for motors as well as motor parts such as armatures and components. It is consciously trying to move up the value chain by offering higher end products. Though the company's performance is unlikely to improve significantly this fiscal, the impact of these initiatives will be reflected over a period of time. The company is likely to see growth in volume and performance from the next financial year.
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